To Be or Not To Be: The Existential Issue for National Governance Bundles

• Author: Carla C.J.M. Millar
• DOI: http://doi.org/10.1111/corg.12066
• Published date: 01 May 2014
• Date: 01 May 2014

To Be or Not To Be: The Existential Issue for

National Governance Bundles

Carla C.J.M. Millar

ABSTRACT

Manuscript Type: Conceptual

Research Question/Issue: The article addresses the issue of whether governance bundles which include both formal and

informal governance mechanisms should be classif‌ied and compared on the basis of national identity.

Research Findings/Insights: The governance bundle affecting each f‌irm has formal components which are frequently based

on national legislation, but also includes social and moral dimensions, and behavior in words and action that may differ

widely within nations and may derive from relationships with f‌irms and communities in other countries or even globally;

only the formal component of the governance bundle may be national. The development of governance bundles is a

long-term process that ref‌lects the culture and ethical demands of the societies in which companies operate; formal

institutions and laws develop and are respected – or not – in light of how informal governance mechanisms create the

behavior in society. The continued existence of a mixture of familiar and different governance mechanisms in emerging

markets is throwing doubt on the convergence hypothesis that development will lead all governance to a consistent model.

Theoretical/Academic Implications: The role of informal institutions – also as substitutes for corporate governance mecha-

nisms – is central to understanding the functioning of corporate governance. Theory needs to consider the individual

company and different company types (e.g., size, industry, ownership) in order to illuminate the interaction of formal

corporate governance and informal institutions and other forces which constrain the company and those who control it.

There needs to be more attention to the issue of sub-national and supra-national bundles together with “hybrid situations”

where multinational corporations operate alongside local companies.

Practitioner/Policy Implications: The acceptability of corporate governance regimes depends on implementation at f‌irm

level; as there are substantial differences in the informal mechanisms amongst them, which may vary according to factors

such as size, industry, ownership, organization or region, policy measures should have the f‌lexibility and sophistication to

take account of these.

Keywords: Corporate Governance, Governance Bundles, Informal Institutions, Formal and Informal Governance

Mechanisms, Supra-national, Sub-national and Hybrid Bundles

INTRODUCTION

The focus of the conference at Judge Business School,

Cambridge, in June 2012 to mark the 20th anniversary of

CGIR, was “national governance bundles”: the mix of formal

and informal rights and responsibilities affecting the gover-

nance of f‌irms nationally. Our observation(Millar, Eldomiaty,

Choi, & Hilton, 2005a) that these differed in different coun-

tries led to the keynote address and this paperlooking at how

governance in emerging economies is “hybrid” and illumi-

nating dynamics in developed economies.

The issues addressed by corporate governance (CG) are

often similar in both developed and emerging economies

but are less well researched in the latter, especiallythe role of

informal institutions. Developed countries have relatively

stable business systems, and informal institutions that have

evolved over considerable time are basically nationwide and

inf‌luence almost all f‌irms in the country. This has made it

easy to assume that CG regimes are consistent at the national

level. However, in emerging economies only the formal

component may be national while the informal institutions,

which are key to understanding CG, may vary internally or

be shared on a multi-country basis.

The title of this piece, “To Be or Not To Be,” ref‌lects the

question whether governance bundles are necessarily

national,whether the nation is necessarily the principallocus

*Address for correspondence: Carla C.J.M. Millar, School of Management and Gover-

nance, University of Twente, PO Box 217, 7500 AE Enschede, The Netherlands.

Tel: 0031 53 489 5355; E-mail: c.millar@utwente.nl

194

Corporate Governance: An International Review, 2014, 22(3): 194–198

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12066